Reliance Industries Limited (NSEI:RELIANCE) is close to merging its India media business with The Walt Disney Company (NYSE:DIS), opens new tab with a 51% to 54% stake, a deal that values the U.S. giant's Indian operations at just $3.5 billion, said three sources with direct knowledge. The valuation of Disney's India unit is sharply lower than the $15 billion to $16 billion estimated when Disney acquired Fox in 2017. Its TV and streaming business in India has struggled over the years, with its digital platform especially facing a user exodus in stiff competition over cricket streaming with Ambani's platforms. The deal will strengthen Reliance's hold over India's $28 billion media and entertainment market, especially after a separate $10 billion merger deal between Japan's Sony (6758.T), opens new tab and India's Zee Entertainment (ZEE.NS), opens new tab collapsed last week.

The three sources said Bodhi Tree Multimedia Limited (NSEI:BTML), a joint venture between James Murdoch and a former Disney executive, Uday Shankar, is also in talks to take a stake of around 9% in the new merged entity. Disney will hold around 40%. Reliance, Disney and Bodhi Tree did not immediately respond to requests for comment.

Two of the sources said the final percentage stake numbers could change. The sources declined to be identified because the talks are confidential. A deal could be closed by mid-February, the sources said.

One of the executives said Viacom18 was also likely to infuse some cash in the merged entity. The third source said the deal talks were in advanced stages and some tax related matters were still being ironed out, though broad contours were almost finalised.